Trust fund gravy for Civic San Diego

Civic San Diego, the city-owned nonprofit tasked with winding down San Diego’s redevelopment agency and permitting decisions in downtown, needs more money.

The nonprofit, which was formed in 2013 from the ashes of the Centre City Development Corporation and Southeastern Economic Development Corporation, needs cash to pay for the five new staff members it will hire to help handle its increasing workload.

In recent months, the City of San Diego has been granting the nonprofit more duties, including approving and issuing development permits in downtown and other neighborhoods. 

On June 8, the city council approved Civic San Diego's $7.445 million budget for the coming fiscal year, a 10 percent increase from the current year budget. Nearly half of that money, $3.6 million, is paid from the Redevelopment Property Tax Trust Fund.

Since the dissolution of redevelopment agencies statewide, the city's Successor Agency (former redevelopment agency) and Civic San Diego have been on the hunt for extra revenue to pay for administrative and operating expenses.

Nearly half of Civic San Diego’s budget is paid for by proceeds from the former redevelopment tax. Since the state’s dissolution of redevelopment agencies, money collected from the redevelopment tax increment is placed into the Redevelopment Property Tax Trust Fund. This fund, controlled by California's Department of Finance, is used to pay for development projects that were agreed to before the state abolished redevelopment, as well as for any bonds or loans associated with them. In order to receive the money, the city’s Successor Agency is required to submit a work plan biannually to the state.

On nearly each work plan submitted to the Department of Finance for approval since 2011, San Diego’s Successor Agency has requested additional money to pay Civic San Diego’s overhead.

In addition to the bump in operating expense, Civic San Diego staff now have the authority to ask the city for "advances" to pay for permitting and "non-permit-related" services. According to the budget report, revenue from permitting is expected to raise over $1 million per year. However, nowhere in the staff report was there any mention of how and when any advances would be repaid.

California's Department of Finance, the department in charge of doling out unspent redevelopment tax dollars, has denied repeated requests from San Diego's Successor Agency for added administrative costs, to the tune of $3.8 million — state law caps administrative fees at 3 percent of the annual redevelopment tax.

In 2013, the nonprofit tried to raise its allowance by turning to the city for loans. That year, Civic San Diego asked for a $1.638 million loan to pay for administrative costs.

The loan, according to city documents, will be repaid in future years with money that would otherwise be spent on projects.

Civic San Diego has drawn criticism for what some perceive as high overhead and for an agreement with the city to allow Civic San Diego to take over permitting and planning duties in downtown and surrounding neighborhoods.

Shortly after the announcement, state Assembly member and former labor leader Lorena Gonzalez challenged the agreement by introducing a new bill that would require the city council to give final say on land-use decisions made by the nonprofit; that bill is making its way through the state capitol.

More doubts were cast when one of Civic San Diego's board members, Murtaza Baxamusa, who also serves as a director of planning for the San Diego Building Trades Family Housing Corp., filed a lawsuit against Civic San Diego seeking for additional clarity on its powers

“To date, the Board has approved millions of taxpayer dollars and New Market Tax Credits to fund downtown area projects with virtually no oversight from the City Council," reads an excerpt from the April 10 lawsuit.

"In essence, [Civic San Diego's] board operates without accountability to the City Council, and thus without accountability to the taxpayers whose dollars it spends. The fact the Board apportions taxpayer dollars should be enough to demand the City Council's oversight. Yet [Civic San Diego's] operations demand close watch for a multitude of reasons.

"In fact, the public has been silenced through the operation of [Civic San Diego]. Taxpayers cannot be heard by the City Council on appeal, and they cannot be heard at the ballot box. Thus, neither [Civic San Diego] nor the City Council have to account for the planning and permitting decisions of the [Civic San Diego] board. [Civic San Diego] does not have to answer to the City Council, and the City Council does not have to answer to its constituents."

But in regards to the rising administrative costs, Civic San Diego says the state's three percent allotment doesn't cut it.

"[Redevelopment Property Tax Trust Fund] funded work is only a portion of the total work involved in the wind down of redevelopment," writes Richard Seges of Civic San Diego. "Other sources cover the work not funded by administrative fees on [Redevelopment Property Tax Trust Fund]. Since the Successor Agency receives administrative fees only on enforceable obligations funded by [Redevelopment Property Tax Trust Fund], it is not feasible to cover the cost of all of the wind-down efforts using just the administrative fee. In Fiscal Year 2014, for example, administrative fees on [Redevelopment Property Tax Trust Fund] only covered about 80 percent of the cost of the wind-down work."

Added Seges, "The authors of the dissolution laws knew it would not be possible to support all wind-down operations from the three percent administrative fee, so the law allows other funding sources to fund some of the administrative costs. Since January 2013, the administrative costs of the Successor Agency have decreased by 34 percent. The decrease in administrative costs is consistent with the intent of the dissolution laws and the wind-down process."

A city council committee is expected to hear a proposal that if approved would bring additional oversight to Civic San Diego.

(corrected 6/11, 11:30 a.m.)